Help Spot my mistakes - Lease vs Buy with RVG

Hello All,I am looking to pickup an inventory car that is priced at ~$87,800 and am trying to determine if I should lease the car or buy it with the Resale Value Guarantee. I spoke to Tesla finance and they said that the best 60 month loan rate is 2.25%.The lease residual if I wish to buy the car at the end of the lease is $52,875 at the end of 36 months. I am trying to compare the following 2 lease vs buy scenarios and buying with RVG ends up being the right decision. From my estimation,it makes no sense to lease the car.

Can the collective hive mind spot any mistakes in the scenarios below that would switch the decision from buy to lease even if I plan to be in the car for only 36 months and no more. Even if I decide to buy the car, it is cheaper to buy it with the RVG.

1a: If I decide to buy the car at the end of the lease, the total cost of the car is = 43,715 +52,875 = $96,5901b: If I decide to walk away, I have spent $43,715 for the joy of driving a Model S for 3 years.

2a: If I decide I want to keep the Model S, I will pay off the car and the car will have cost me= $54,894 + $30,105 = $84,999.2b. If I decide to walk away from the car at 36 months and give it back to Tesla, I will use the RVG to pay off the outstanding loan of $30,105 and walk away with (42,000 -30,105) $11,895. So the 36 month cost to own the car will have been (54,894 - 11,895) $42,999.
Are there any mistakes in the analysis above?
Thanks for your help guys and gals.

Def get the pano roof,
from all the calcs i've done previously, I've never found leasing to be better than financing. (depending on the rate)
If you can get a rate of like 1% or so, with some credit union, you may be even better off,

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Thanks Spentan. Yeah, the contrast of the pano roof with the pearl white makes for a very elegant looking car. I think the red reflected the raw power better, but also doesn't hide dirt and scratches as well. What do you think of your red?
The panoramic roof also made the inside of the car look so much nicer with the black leather seats.

I'm going to compare the Tesla rate against other rates. I am guessing the difference in rates translates to $1K to 2K in interest over 36 months and the Resale Value Guarantee that the extra interest allows for might convince me to stick with the higher rate. Any comments on that?

On your own numbers, the two versions of option B comes out very close (43,715 vs 42,999) and to get the lower amount you put up a larger downpayment and paid more monthly - so your personal cash-in-bank is an average of about $10,000 less than it would be for the lease. Depending how you value that $10,000, it makes the two options very close indeed.

OTOH, actually exercising the Tesla buy-back is a worst-case scenario. There's also an option 2c of selling the car for market value (hopefully greater than the guaranteed value), in which case the purchase could work out much better.

One other factor...about 18 mos ago I was rear ended (bumped) while I was at a full stop for a red light. While the other driver's insurance covered the repair to the bumper and trunk, when I went to trade in the car (last month), I was given about $5K less because it was reported as having been in an accident despite a full repair, no frame or mechanical damage. Frustrating because this was not my fault in any way.

So if you lease, obviously you have no residual value risk. If you are the owner via a loan, you absorb this risk. While unlikely, you never no when you will be in a fender bender. Very hard to predict the residual value on these cars as well. Kind of like owning an iPhone for three years. Hopefully, in 3 years the new models have much better range, even faster charging, and who knows what else.

One other factor...about 18 mos ago I was rear ended (bumped) while I was at a full stop for a red light. While the other driver's insurance covered the repair to the bumper and trunk, when I went to trade in the car (last month), I was given about $5K less because it was reported as having been in an accident despite a full repair, no frame or mechanical damage. Frustrating because this was not my fault in any way.

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That's what a diminished value claim is for. Based on your location and your story you probably can even still make the claim.

On your own numbers, the two versions of option B comes out very close (43,715 vs 42,999) and to get the lower amount you put up a larger downpayment and paid more monthly - so your personal cash-in-bank is an average of about $10,000 less than it would be for the lease. Depending how you value that $10,000, it makes the two options very close indeed.

OTOH, actually exercising the Tesla buy-back is a worst-case scenario. There's also an option 2c of selling the car for market value (hopefully greater than the guaranteed value), in which case the purchase could work out much better.

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Yes, the 2 options are very close, but "buying" has a larger down payment. If I reduce the down payment to the same amount as the lease ($7K), the difference is reduced even further ~$200.
Agree, that the Tesla buy back is a worst case scenario and would only need to be exercised if S85 prices crash and the car is worth a lot less than ~48% of the sale price. Hopefully if I do decide to get a newer car, I will be able to see at a higher price than the Tesla Resale Value + Extra cost of finance.

One other factor...about 18 mos ago I was rear ended (bumped) while I was at a full stop for a red light. While the other driver's insurance covered the repair to the bumper and trunk, when I went to trade in the car (last month), I was given about $5K less because it was reported as having been in an accident despite a full repair, no frame or mechanical damage. Frustrating because this was not my fault in any way.

So if you lease, obviously you have no residual value risk. If you are the owner via a loan, you absorb this risk. While unlikely, you never no when you will be in a fender bender. Very hard to predict the residual value on these cars as well. Kind of like owning an iPhone for three years. Hopefully, in 3 years the new models have much better range, even faster charging, and who knows what else.

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Wait, if you have an accident in a lease car (no fault of yours), there is no additional liability at the end of the lease? I did not know that. Can you please confirm this? I have never leased a car before. I have always bought slightly used cars that are "new to me". In the last 15 years, I have owned -
* $10K - 1997 Jeep Wrangler
* $18K - 1998 Jeep grand Cherokee (5.9 Limited) - Both jeeps were great for 4-wheeling
* $24K - 2001 Mercedes Benz SLK 320 - Fun roadster
* $25K - 2006 Acura TL - This is my current car and I've had it since May 2010 when my little one was born and I had to get rid of the roadster.

The Tesla which I just put down a deposit on (super excited!!) was ~$93K. More than all of the above put together. It is also my very first brand new car. So I am trying to mitigate as much risk as possible.
Tesla Financing doesn't offer GAP insurance. Any idea where I can pick that up from?
My inventory car gets here from the Portland early next week. It feels like Christmas! Wait, it will be....how perfect! :biggrin:

Wait, if you have an accident in a lease car (no fault of yours), there is no additional liability at the end of the lease? I did not know that. Can you please confirm this? I have never leased a car before.

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As long as the car is repaired to the Manufacturer's specifications, there is no additional liability at the end of the lease. Basically this translates to using a shop authorized by the manufacturer.

Leases tend to be very forgiving on damage, When I leased both a BMW and a Porsche, I was told that as long as dings were small enough to be covered entirely by a business card, it would not be counted as excessive wear. On the secondary market, a ding the size of a business card would hurt resale pretty bad.

As long as the car is repaired to the Manufacturer's specifications, there is no additional liability at the end of the lease. Basically this translates to using a shop authorized by the manufacturer.

Leases tend to be very forgiving on damage, When I leased both a BMW and a Porsche, I was told that as long as dings were small enough to be covered entirely by a business card, it would not be counted as excessive wear. On the secondary market, a ding the size of a business card would hurt resale pretty bad.

If you lease GAP coverage is included automatically in your payment. So for a small business owner a lease is a much better option for tax purposes as well as its nice to know if you have a major accident and its totaled you can just walk away.

I'll have to look into GAP coverage. Though I decided to put about 20% down, so I don't know if I truly need it. I decided to buy the vehicle instead of leasing and take that small risk of having to deal with depreciated RVG if I get into a fender bender. Here's hoping that I don't jinx myself. It's also unlikely that I will turn the car in at 36 months unless Tesla comes up with some amazing feature that I must have.

You should probably consider the time value of money. In your example, you are counting the back end recovery of 11,895 from the RVG in today's dollars. Even if you just discount that future value at a very weak 1.5% rate of inflation, it knocks off $520 in present value to 11,375.

If you instead use a higher rate of 3%, you've cut off $1,010 to a PV of $10,885. You've now paid less for the lease in present value terms.

You should probably also discount the extra monthly payments, but you get the idea.

If you do all that, you'll probably find that tesla priced the lease at parity to the RVG at a 2.25% discount rate. In other words, if you have better risk-adjusted investment opportunities than 2.25% annualized over 5 years, you should lease. If you don't, you should buy with the RVG.